Results
Q4 of 2014/15
Financial Year 2014/15
Media and Analyst Conference
Zurich, 4 June 2015

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Julius Renk

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting

Andreas Hürlimann

HO xx-P2

1. Global Market Leader in Current and Voltage Transducers
Market Position

Performance

Perspectives

 Global market shareof 50% in Industry
 Benchmark in service
and product quality
 4 production sites in
Europe and Asia
 Sales of CHF 257.8
million in 2014/15

 Continued sales
growth and margin
improvements
 Dividend yield >5% ineach year since 2009

 Reinforced investment in innovation
 Solid growth perspectives due to underlying trends
 Strong foothold in
China
 EBIT margin target of
15 to 20%3

1. LEM Applications:
Air Conditioner

B HO xxx-S
1

B

A HLSR
2A

1 Central air-conditioning system
2 Room air conditioner

In central air conditioning (1) (and increasingly
residential system (2)), the air is cooled byblowing it over an evaporator filled with arefrigerant. Then the refrigerant is pumped
into a condenser where it releases the heat. A
pump or compressor is used to move therefrigerant, and a motor runs the compressor.
Inverters control the motors, which drive thepumps and fans. Robust current
measurement devices like the HLSR models(A) or HO xxx-S models (B) are used to reachthe desired temperature quicker while
consuming less electricity and operating more
quietly.

4

1. LEM Applications:Electric Motorcycle
The direct-drive power train of an electricmotorcycle is highly efficient andmaintenance-free, but requires a highly
accurate torque control.
A HAH1 DR
1 Direct-drive brushless motor
2 Direct-drive electronics
3 Battery charger
4 Lithium-ion battery

4
A
1

3
2

The electricity is stored in a rechargeable
lithium-ion battery (4), which supplies the
direct-drive electronics (2). The direct-drive
electronics controls the direct-drive brushless
motor (1). The direct-drive motor requires noshifting and offers instant torque. Electricmotorcycles provide for recharging the battery
with the battery charger (3).
The HAH1 DR transducers (A) are used by
the direct-drive electronics for a dynamic andaccurate torque control.
51. LEM Applications:Power Generator
The diesel driven engine (1) activates analternator (2), which converts mechanicalenergy into electricity. The electricity is
conducted to the network and measured at
the output of the alternator through the RT
Rogowski coil, which is connected to theenergy meter (3). The energy meter transmits
the information to the central post analysis (4)to adapt the power generation to demand.

1 Motor
2 Alternator
3 Energy meter

A RT 2000

4 Central post analysis
5 Grid1
4
2

5

To measure real-time electricity production,
the RT 2000 (A) offers advantages: thetransducer installation on the generator does
not require any interruption of production, theirsize is minimal, and their robustness ensureshigh reliability and long-term service.

3A
6

1. LEM Applications:Super Charger Station for Electric Vehicles
A super charger (1) operates using several
400V DC chargers in parallel. 1MW would be
required from the grid (5) if 10 cars werecharged simultaneously. Charging stations
therefore often include a photovoltaic plantwith solar panels (2) and a battery storage
system (4). Stored energy is used to reduceenergy peaks and to best use photovoltaic
energy.

A HO 250-P

2A

The chargers use the HO 250-P (A) tomeasure the DC current while the photovoltaic
inverter (3) uses up to 7 transducers, such as
CASRs, HLSRs and CTSRs to measure DC,
AC and residual currents.

1A
3A
1 Super charger

A

4

2 Solar panels
3 Photovoltaic inverters

5

4 Battery storage
5 Grid7

1. Diverse Target Markets – Diversified Businesses
Businesses

Share of sales
2014/15

Green Cars
Conventional Cars

14%

Cyclicality

Macro drivers

Consumer durables

Technology adoption
Fuel savings

Late cycle

Infrastructure investments

Mid cycle

Energy prices, subsidies

Early cycle

Industrial investment

High precision
Traction
Renewable energies& power supplies

86%

Drives & welding

Automotive segment
Industry segment

8

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Julius Renk

4. Strategy and Outlook

François Gabella

5. Proposals Shareholders Meeting

Andreas Hürlimann

DAHBV29

2. Highlights : Sales Growth and High Margins
In CHF millions, %2014/15

2014/15 vs.
2013/14

Q4 2014/15 vs.
Q3 2014/15

Orders

251.0

+1.9%

-4.9%

Sales

257.8

+4.9%

-4.9%

EBIT

54.2

-2.7%

-27.7%Net profit

43.1

-5.5%

-14.3%■

Appreciation of Swiss franc versus euro adversely affected Q4 results■

Market share gains in Industry businesses■

Continuing growth in China■

Expansion of activities in Bulgaria in line with plans■

High number of product launches■

High customer and employee satisfaction10

2. Product Launches 2014/15 (1/2)
HO xxx-S

 Three new products in the HO xxx-S family
 Proprietary ASIC with twice improved accuracy
 High performance, over-current detection
Industry
 Compact size for panel mounting
 “Chameleon” allows three interchangeable mounting ways

HOI
 Customer specific transducer
 Proprietary ASIC with twice improved accuracy
 High performance Compact size for high current

Industry

LF product family
 Four new products in the LF family
 Proprietary ASIC for closed loop hall effect technology
 High performance, matching fluxgate performance
Industry
 Higher immunity against surrounding perturbations11

2. Product Launches 2014/15 (2/2)
IT xx5

 Variety of models to cover 60A to 600A nominal
 High accurate fluxgate closed loop technology
 Exceptional accuracy expressed in ppm over thetemperature range
 Wide operating temperature range

Industry

HAH3 DR S03
 Compact 3-phase transducer
 Improved performance at lower cost
 For drive applications in hybrid cars

Automotive

DAHBV2
 Less offset and better gain than version 1
 Lower cost
 Smallest connector
 For green cars battery pack monitoring

Automotive
12

2. LEM Perceived as the Global Leader in Providing
Transducers to Measure Electrical Parameters2014 customer satisfaction survey conducted in all territories
What our customers say:
■
■
■
■
■
■
■

Quality of LEM products rated even higher than in 2012
Positive perception of LEM products in terms of reliability, quality,
performance and innovation
Products have a positive impact on the value and performance ofcustomers’ own products
LEM improved the quality of relations since 2012
LEM understands customers' requests and expectations, both from acommercial and a technical perspective
Appreciate working with LEM
Rate LEM as a reliable business partner13

2. Employees are strongly committed to the company
and proud to work for LEM
2014 global employee engagement survey conducted
What our employees say:
■
■
■
■
■

LEM is more customer focused and much more able to meetcustomers’ needs than in 2012
LEM is more efficient and result driven
Highest engagement level at the new site in Sofia
Higher confidence about the future of LEM
LEM strategy better understood and perceived as a strength14

2. Net Sales
In CHF millions

In CHF millions, %

Sales

300

YoY
as
reported275

Q4 vs.
Q3
at constantcurrencies

250

Industry

221.0

+4.7%

+6.7%

-7.9%

225

Automotive

36.7

+6.2%

+6.4% +14.2%

200

Total sales

257.8

+4.9%

+6.7%

-4.9%

175

■

150
125

■

100
75

■

50

Sustained growth from Industry businesses;
increased market share
Growth in Automotive businesses
supported by improved performance in thegreen cars markets
Negative currency impact on sales

25
0
10/11

11/12

12/13*

13/14

14/15
15

* Restatement following IAS 19R application (pensions)2. Quarterly View
In CHF millions

Book-to-bill ratio

80.0

1.2

70.0
63.1
60.0

65.0

65.1
61.8
61.1
55.0

55.8

57.6

66.5

64.71
1.0
61.5

61.1

0.8
50.0

40.0

0.6

30.0
0.4

 Booking down by 4.9%
Q4 vs. Q3
 Currency impact in Q4
 Book-to-bill ratio stable
at around 1
 Customers’ requested
lead times and stocklevels continue to trend
downwards

20.0
0.2
10.0

0.0

0.0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
12/13 12/13* 12/13 12/13* 13/14 13/14 13/14 13/14 14/15 14/15 14/15 14/15
Orders received* Restatement following IAS 19R application (pensions)

Sales

Book-to-Bill ratio16

2. Industry Segment: Regional Markets
EuropeIn CHF millions, %Sales

GrowthYoY

Growth Q4
vs. Q3

Europe

94.6

+0.2%

+0.6%

N. America

24.9

-8.1%

+13.3%

Asia and
RoW

101.6

+13.3%-19.9%

Total

221.0

+4.7%

-7.9%

North America
Asia and ROW

43%

46%

11%

 Growth and market share gains acrossmost businesses Strong growth in China
 Asia the most important sales region
 Success with recently launched products
 Chinese New Year (fewer working days)
impacted Q4 in Asia
17

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales

Businesses and Applications

25

280

240
20

Drives & welding (growth YoY: +1%)
 Transfer of customers’ production to Asia
 Weakening trend in Europe and North America
 Positive performance in Asia

200

15

160

120

10

80
5

Renewable energies & power supplies (+1%)
 Growing investments in renewable energies in
China and India
 Support from offshore wind projects in Europe
Traction (+26%)
 Recovery of infrastructure investments
 High activity in China, India and Korea; for local
and export markets
 High activity in light rail applications

40

0

0
10/11

11/12

12/13*

13/14

14/15

High-precision (-13%)
 Stable medical applications
 Weak demand in test & measurement18* Restatement following IAS 19R application (pensions)2. Automotive Segment: Regional Markets
In CHF millions, %EuropeSales

GrowthYoY

Growth Q4
vs. Q3

Europe2.9-2.7%+48.9%

N. America

17.8

-1.0%

+18.6%

Asia andRoW

16.0+17.7%

+4.1%

Total

36.7

+6.2%

+14.2%

North America
Asia and Rest of World
8%

44%

48%

 Focus on Asian and North American
markets
 Robust battery management sales
 New projects in green cars
businesses in China

19

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

40

Businesses and Applications

25

35
20
30

25

15

20
10

15

Conventional cars (YoY: +4%)
 Consistent battery management business New customers and new platforms withexisting customers
 New start/stop application for niche markets
Green cars (HEV, EV) (+15%)
 China promotion to use green cars triggering a
sharp growth at the end of 2014
 New projects with Chinese manufacturers
 Recovery of hybrid vehicle applications

10
5
5

0

0
10/11

11/12

12/13*

13/14

14/15
20

* Restatement following IAS 19R application (pensions)2. Business Development China
Sales

Production

■

■

■

Market share of over 50%
Most important market with 26% of
total sales

LEM China stabilizes its #1 position aslargest manufacturing site of the Group(58% of total production, compared to
57% in financial year 2013/14)“Made by LEM” quality■
In CHF millions

In CHF millions

60

160
140

50
120
40

100
80

30

60

20

40
10
20
0

0
10/11

11/12

12/13

13/14

14/15

10/11

11/12

12/13

13/14

14/15
21

2. New Production Site in Sofia (Bulgaria)
 Objectives of the new site Diversify LEM’s cost-competitive production
 Increase production capacity close toEuropean customers
 Increase natural hedge of operations
 Absorb major part of LEM’s future growth Achievements
 Investment of CHF 2 million into new site
 Production started 1 October 2013
 Delivery approvals from customers received
 Expansion since October 2013
 118 employees 5 production lines
 8 product families with more than 100 different products
 Production represents 5.9% of global output in Q4 of 2014/15

22

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Julius Renk

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting

Andreas Hürlimann

LA 130/150-P

23

3. Financial Highlights
 Robust profitability
 Gross margin of 45.9%
 EBIT margin of 21.0%
 CHF 2 million negative impact on EBIT due to foreign exchange
developments in Q4 of 2014/15
 Net profit CHF 43.1 million

 Low tax rate of 16.3%, due to one-off effects
 Strong balance sheet with equity ratio of 65.0%
 Reduced net working capital by CHF 0.8 million
 Strong free cash flow of CHF 40.5 million

24

3. Balance Sheet Analysis
In CHF millions

31.3.201431.3.2015

Net working capital

38.7

37.9

Fixed assets

37.8

39.9

Noncurrent liabilities

-6.9

-6.8

Net operating assets

69.6

71.0

Net cash / (debt)

24.6

20.9

Equity

94.2

91.9

65.1%

65.0%

Days of sales outstanding

65

66

Days of inventory outstanding

80

72

Days of payables outstanding

49

28

Equity ratio25

3. Income Statement
In CHF millions

2013/142014/15

ChangeQ3
2014/15

Q4
2014/15

Change

Sales

245.6

257.8

+4.9%

64.7

61.5

-4.9%

Gross margin

47.0%

45.9%

-1.1pt

46.2%

44.8%

-1.5ptOperating expense

-59.6

-64.2

+7.6%

-15.6

-17.2

+10.1%

EBIT

55.7

54.2

-2.7%

14.3

10.3

-27.7%Net financial exp.

-1.4

-2.7

+94.0%-1.4

0.5-139.1%

Income tax

-8.7

-8.4

-3.5%

-1.2

-0.9

-27.6%Net profit

45.6

43.1

-5.5%

11.7

10.0

-14.3%

26

3. Results by Quarter
In CHF millions

In % of sales

80

30%
65.1

70
63.1

61.8

61.1

61.1
60

55.0

55.8

65.0

66.5

64.7

61.5

25%

57.6
20%

50
40

15%

30
10%

 Q4 vs. Q3 sales down
by CHF 3.2 million
 CHF 2 million foreignexchange impact on
EBIT margin in Q4 of
2014/15
 Q4 of 2012/13 included
a restructuring charge of
CHF 1.9 million

20
5%
10
0

0%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
12/13 12/13* 12/13 12/13* 13/14 13/14 13/14 13/14 14/15 14/15 14/15 14/15

Orders received
Op. ROS* Restatement following IAS 19R application (pensions)

Sales
Net Profit in % of sales

27

3. Gross Margin
In CHF millions

In % of sales

140

48%
47%

120

Gross margin

2013/142014/15

Q3
2014/15

Q4
2014/15

115.4

118.4

29.9

27.5

47.0%

45.9%

46.2%

44.8%

in CHF millions
46%

Gross margin

100

45%

in % of sales

44%

80

 Adverse foreign exchange impact on grossmargin in Q4
42% Positive impacts on gross margin due to41%
focus on
 Raw material sourcing
40%
 Internal productivity
39%
 Relocation to cost-competitive
38%
manufacturing sites
43%

60

40

20

0
10/11

11/12

12/13*

13/14

14/15

28
* Restatement following IAS 19R application (pensions)3. Operating Expense
In CHF millions

In % of sales
30%

70

60

25%

Operatingexpense2013/142014/15

Q3
2013/14Q4
2014/15

59.6

64.2

15.6

17.2

24.3%

24.9%

24.2%

28.0%

in CHF millions
50
20%

Operatingexpensein % of sales

40
15%
30
10%
20

5%

10

0%

0
10/11

11/12

12/13*

13/14

14/15

 Higher administration expense driven by IT and strategy consultancy
 LEM Bulgaria development
 Increased R&D spend Positive one-off effect on pension
revaluation of CHF 1.2 million in
2013/14
 Ongoing strict cost control measures
29* Restatement following IAS 19R application (pensions)3. R&D Expense
In CHF millions

In % of sales
8%

2013/142014/15

Q3
2014/15

Q4
2014/15

14.4

15.3

3.7

4.3

5.9%

6.0%

5.7%

6.9%

15
7%

12

6%

5%

R&D
expensein CHF millions

R&D
expensein % of sales

9
4%

6

3%

2%
3
1%

0

 Maintained high investment in R&D for
both segments
 Ongoing renewal of product range withfocus on optimized cost, higher
accuracy, easier integration into
customers’ systems and new functions

0%
10/11

11/12

12/13*

13/14

14/15
30

* Restatement following IAS 19R application (pensions)3. EBITIn CHF millions

In % of sales
25%

60

EBIT

50
20%

in CHF millions

EBIT

40

in % of sales

2013/142014/15

Q3
2014/15

Q4
2014/15

55.7

54.2

14.3

10.3

22.7%

21.0%

22.1%

16.8%

15%
30
10%
20

5%
10

0

 High operational profitability maintained Continued cost control and high grossmargins
 Adverse foreign exchange impact in Q4
of 2014/15

0%
10/11

11/12

12/13*

13/14

14/15
31

* Restatement following IAS 19R application (pensions)3. Financial Expense
In CHF millions

2013/142014/15

Q3
2014/15

Q4
2014/15

Exchange effect*

-1.4

-2.6

-1.3

+0.6

Other financial expense &income

+0.0

-0.1

-0.1

-0.0

Total

-1.4

-2.7

-1.4

+0.5



2014/15 exchange effect mainly driven by EUR, JPY and RUB devaluation;
partially compensated by gains on USD and CNY positions

Foreign exchange hedge gain of CHF 1 million in Q4 of 2014/15

Foreign exchange hedging policy (unchanged)*



EUR: 100% of net exposure 12 months forward

USD: 100% of net exposure 12 months forward

The line “exchange effect” in the financial result is mainly due to currency volatility during the time between booking andsettling a receivable/payable. Over and above this line, foreign exchange rates impact every P&L line through the rate at
which each transaction is booked and at which it is consolidated into CHF.

32

3. Income Taxes
2013/14
Expected income tax rate
Expected withholding tax rate
Expected tax rate
Permanent differences
Effect of changes in tax rates on deferred tax
Adjustment in respect of previous period’s income tax
Other differences
Effective tax rate

2014/15

16.8%
2.0%
18.8%
0.1%
-2.9%
-0.1%
0.1%
16.0%

17.6%
0.8%
18.4%
0.5%
-2.4%
-0.4%
0.2%
16.3%

 Higher expected tax rate due to decision to abandon the HNTE
status in China
 One-off reversal of withholding tax provision after application of
CN-CH double taxation agreement33

3. Net Profit
In CHF millions

In % of sales

50

20%

45

18%

40

16%

35

14%

30

12%

Net profit
in CHF millions

Net profit
in % of sales

2013/142014/15

Q3
2013/14Q4
2014/15

45.6

43.1

11.7

10.0

18.6%

16.7%

18.0%

16.2%

2013/14
-1.4

-8.7

55.7
25

10%

20

8%

15

6%

10

4%

EBIT

45.6

Financial expense

Income tax

Net profit

2014/15
-2.7
-8.4

5

2%

0

0%
10/11

11/12

12/13*

13/14

14/15

54.2

EBIT

43.1

Financial expense

Income tax

Net profit
34* Restatement following IAS 19R application (pensions)3. Cash Flow Statement
In CHF millions

2013/142014/15

Profit before taxes

54.4

51.5

Adjustment for noncash items and taxes paid

-5.1

4.3

Cash flow from changes in net working capital

-8.7

-5.6

Cash flow from operating activities

40.6

50.2

Cash flow from investing activities

-8.7

-9.7

Free cash flow

31.9

40.5

Cash flow from financing activities

-34.0

-45.1

Change in cash and cash equivalents

-2.2

-4.6

Cash and cash equivalents at the end of the period

24.6

20.9
35

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Julius Renk

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting

Andreas Hürlimann

HLSR
36

4. Market Factors and Strategy■ We firmly believe in our strategic
direction and the 4 drivers for ourbusiness remain unchanged■ We will continue to capitalize on
the drivers of LEM’s markets
through pure play components company
 diversification across geographiesand businesses374. Executing Strategy
Strategic priorities
Increase technology leadership■ Reinforce multidisciplinary innovation team■ Increase number of product launches■ Constantly improve performance of products
Increase efficiency■ Reduce product cost through costcompetitive sourcing and manufacturing■ Reduce complexity of organization
Increase production flexibility■ Develop systems to better forecast demand
fluctuations■ Improve supply chain management

Achievements in 2014/15
■
■

■
■

■

Launched high number of new
products
Started development &engineering team in Sofia
Increased activities in Sofia inline with plan
Unification of processes with
new ERP launched 1 April 2015
Maintained high level offlexibility and on-time delivery38

4. Andrea Borla new CFO■

With LEM as of 1 December 2015■

Currently CFO at Schindler France■

Previously a regional general manager at Schindler China andhead of group consolidation at SAirGroup■

Holds a PhD and a Master’s degree in Finance and Accounting
from University of St. Gallen■

Age 48, Swiss national

39

4. Rainer Bos new head of Automotive segment■

Succeeding Luc Colombel as of July 2015■

Currently managing director, Automotive at AmphenolTuchel Electronics GmbH■

Held leadership positions in business management,
Sales & Marketing, key account management and R&D
Projects in Delphi and Continental Automotive Systems■

Graduated in Industrial Engineering from Darmstadt
University of Technology■

Age 53, German national40

4. Outlook■

For 2015/16 we expect■ Volume growth (in number of transducers) in both segments■ Price pressure und foreign exchange effects may adversely
affect LEM, leading to uncertainty regarding sales growth■ EBIT margin expected to be within the target range of 15 to20%■

Swiss franc to remain strong vs. euro■

Continuous reevaluation of all processes to determine
their optimal location

41

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Julius Renk

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting Andreas Hürlimann
ITL 1200-T

42

5. Dividend Proposal■

LEM Dividend History
40

40

40*

30
25

■
■
■

Dividend policy of distributing
significantly more than 50% ofconsolidated net profit toshareholders
Ordinary dividend of CHF 40 per
share proposed
Payment corresponds to apayout ratio of 105.7%
Sign of trust in the Company’s
future2010/11 2011/12 2012/13 2013/14 2014/15
43*

Proposal to ordinary General Meeting of the Shareholders of 25 June 2015

5. Proposed New Board Member
Ulrich J. Looser
■
■
■
■
■
■

■

M.Sc. Physics ETH Zurich, M.A. HSG, University of St. Gallen
Partner and entrepreneur at BLR & Partners, since 2009
Board member of Straumann, Kardex and other privately held companies
Previously leading management positions at Accenture incl. Chairman ofAccenture (Switzerland) and Partner at McKinsey
Member of the boards of Economiesuisse, University of Zurich and Swiss
National Science Foundation (SNF)
Deep insights into various industrial customer segments combined withproven leadership experience in strategy development, M&A andoperational excellence programsAge 57, Swiss citizen
44

Q&A

45

Financial Calendar and Contact Details
Financial calendar
25 June 2015
30 June 2015
2 July 2015
11 August 2015
11 November 201516 February 2016
9 June 2016
30 June 2016
5 July 2016
7 July 2016

Ordinary General Meeting of the Shareholders for the year 2014/15
Dividend ex-date
Dividend payment date
First quarter 2015/16 results
Half-year 2015/16 results
Third quarter 2015/16 results
Year-end 2015/16 results
Ordinary General Meeting of the Shareholders for the year 2014/15
Dividend ex-date
Dividend payment date

For further information
Julius Renk, CFO
Phone: +41 22 706 12 50
Email: investor@lem.com
46